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Stock market and economic growth in selected Asian countries

Author

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  • Tang, Hong Peng
  • Habibullah, Muzafar Shah
  • Puah, Chin-Hong

Abstract

This study investigates the relationship between stock markets and economic growth in twelve Asian countries from 1980 to 2004. In this study, we utilize the Johansen cointegration and Granger causality tests using quarterly data. Results from cointegration test suggest that there is long run relationship between stock markets and economic growth in four countries namely, China, the Philippines, Singapore and Taiwan. The results of Granger causality test indicate that there is a bi-directional feedback relationship between stock markets and economic growth in China, Hong Kong, Indonesia, Malaysia and Thailand. Whereas in Japan and Korea, we found that there exists a unidirectional short run causal effect running from stock markets to economic growth. On the contrary, we found short run causal effect running from economic growth to stock markets in the case of India and Singapore. In addition, there is no evidence of causality among the variables under study in Sri Lanka.

Suggested Citation

  • Tang, Hong Peng & Habibullah, Muzafar Shah & Puah, Chin-Hong, 2007. "Stock market and economic growth in selected Asian countries," MPRA Paper 37649, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:37649
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    File URL: https://mpra.ub.uni-muenchen.de/37649/1/MPRA_paper_37649.pdf
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    References listed on IDEAS

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    2. Levine, Ross & Zervos, Sara, 1998. "Stock Markets, Banks, and Economic Growth," American Economic Review, American Economic Association, vol. 88(3), pages 537-558, June.
    3. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-1072, June.
    4. Guglielmo Maria Caporale & Peter Howells & Alaa M. Soliman, 2005. "Endogenous Growth Models and Stock Market Development: Evidence from Four Countries," Review of Development Economics, Wiley Blackwell, vol. 9(2), pages 166-176, May.
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    Cited by:

    1. Esteban Gómez & Andrés Murcia Pabón & Nancy Zamudio Gómez, "undated". "Foreign Debt Flows and Domestic Credit: A Principal-Agent Approach," Temas de Estabilidad Financiera 075, Banco de la Republica de Colombia.
    2. Liew, Siew-Ling, 2016. "Determinants of Foreign Direct Investment," MPRA Paper 70447, University Library of Munich, Germany.
    3. Liew, Siew-Ling, 2016. "Review on Determinants of Capital Flight," MPRA Paper 70445, University Library of Munich, Germany.

    More about this item

    Keywords

    Stock markets; Economic growth; Asian economies;

    JEL classification:

    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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